Country Mutual Insurance Co. v. Kambic

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA
COUNTRY 	MUTUAL 	INSURANCE
CO.,
Plaintiff,
vs.
WILLIAM J. KAMBIC, JR.,
Defendant.
Case No. 3:21-cv-00042-JMK
ORDER GRANTING PLAINTIFF’S
MOTION TO BIFURCATE AND
STAY
WILLIAM J. KAMBIC, JR.,
Counter Claimant,
vs.
COUNTRY 	MUTUAL 	INSURANCE
CO.,
Counterclaim
Defendant.
Before the Court at Docket 27 is Country Mutual Insurance Company’s
(“Country Mutual”) “Motion to Bifurcate and Stay.” The motion has been fully briefed at
Dockets 28 and 31. For the following reasons, the motion is GRANTED.
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Country Mut. Ins. Co. v. Kambic 	Case No. 3:21-cv-00042-JMK
Order Granting Motion to Bifurcate 	Page 2
I. 	BACKGROUND
The background of this lawsuit is described in detail in the Court’s Order at
Docket 19. 	Country Mutual’s complaint requests that this Court issue (1) “a declaratory
judgment determining that the Country insurance policy number [A54K5224230] does not
provide coverage for Kambic and/or Wells Fargo for the water damage found in December
2020 to the property at issue,” and (2) “a declaratory judgment determining that Kambic
made material misrepresentations or omissions on the policy application and the policy is
void ab initio.”1
On October 29, 2021, 	Defendant and Counter Claimant William Kambic,
Jr., filed his Answer and Counterclaim.2 	Mr. Kambic alleges four counterclaims against
Country Mutual: (1) breach of contract; (2) breach of the implied covenant of good faith
and fair dealing; (3) bad faith; and (4) “unfair claims settlements acts or practices (violation
of 3 AAC 26.070).”3 	Mr. Kambic seeks punitive damages in addition to a declaratory
judgment that Country Mutual is obliged to cover Mr. Kambic’s claim for water damage
under his policy.4
Country 	Mutual 	now 	moves 	the 	Court 	to 	bifurcate 	Mr. 	Kambic’s
counterclaims and stay these claims pending the outcome of its declaratory judgment
action.5
1 Docket 1 at 10.
2 Docket 21.
3 Id. at 7.
4 See id. at 12–14. Mr. Kambic lists punitive damages and declaratory relief as his fifth
and sixth causes of action. The Court notes that that punitive damages and declaratory judgment
are a form of relief, not separate causes of action.
5 Docket 27.
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Country Mut. Ins. Co. v. Kambic 	Case No. 3:21-cv-00042-JMK
Order Granting Motion to Bifurcate 	Page 3
II. 	LEGAL STANDARD
Federal Rule of Civil Procedure 42(b) provides that “[f]or convenience, to
avoid prejudice, or to expedite and economize, the court may order a separate trial of one
or more separate issues, claims, crossclaims, counterclaims, or third-party claims.” 	The
district court has broad discretion to determine when bifurcation is appropriate.6 	For
example, “[a] court might bifurcate a trial to ‘avoid a difficult question by first dealing with
an easier, dispositive issue.’”7 Implicit in the power to order separate trial is the power to
limit discovery according to that separation.8 	This is because “[o]ne of the purposes of
Rule 42(b) is to permit deferral of costly and possibly unnecessary discovery pending
resolution of potentially dispositive preliminary issues.”9
Whether to bifurcate a trial is a fact-specific inquiry. The Court will consider
“potential prejudice to the parties, potential confusion to the jury, and the relative
convenience and economy which would result from bifurcation,” including whether the
resulting trials would involve the presentation of the same evidence.10
6 Estate of Diaz v. City of Anaheim, 840 F.3d 592, 601 (9th Cir. 2016).
7 Id. (quoting Danjaq LLC v. Sony Corp., 263 F.3d 942, 961 (9th Cir. 2001)).
8 Ellingson Timber Co. v. Great N. Ry. Co., 424 F.2d 497, 499 (9th Cir. 1970).
9 Id.
10 Stevenson v. Holland, 504 F. Supp. 3d 1107, 1127 (E.D. Cal. 2020); see also Hangarter
v. Paul Revere Life Ins. Co., 236 F. Supp. 2d 1069, 1095 (N.D. Cal. 2002) (“[P]iecemeal trial of
separate issues in a single suit is not to be the usual course. It should be resorted to only in the
exercise of informed discretion when the court believes that separation will achieve the purposes
of the rule.”), aff’d in part, rev’d in part on other grounds, 373 F.3d 998 (9th Cir. 2004).
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Country Mut. Ins. Co. v. Kambic 	Case No. 3:21-cv-00042-JMK
Order Granting Motion to Bifurcate 	Page 4
III. 	DISCUSSION
While bifurcation “is not to be routinely ordered,”11 this case presents a
textbook 	use 	for 	Rule 42(b). 	Country Mutual 	seeks 	a declaratory 	judgment 	that
Mr. Kambic’s policy is void ab initio due to alleged misrepresentations and that the policy
does not provide coverage for the December 2020 water damage.12 	Mr. Kambic seeks a
declaratory judgment that Country Mutual breached its contract when it failed to provide
coverage under the policy, along with damages for that breach, a bad faith claim, a breach
of the implied covenant of good faith and fair dealing, and a violation of Alaska state
standards for claim settlements acts or practices.13 The parties do not argue that bifurcation
would result in or prevent potential prejudice, and there is no jury to potentially confuse.
Thus, the only factor to consider is whether bifurcation would result in convenience and
economy for the parties and the Court.
Here, bifurcation has the potential of saving great time and expense. 	The
issue of whether coverage exists under the policy is both preliminary to, and potentially
dispositive of, Mr. Kambic’s counterclaims. 	Even if bifurcation did not occur, the Court
necessarily must determine whether coverage exists before reaching Mr. Kambic’s
counterclaims. If no coverage exists, then bifurcation clearly would result in convenience
11 Hamm v. Am. Home Prods. Corp., 888 F. Supp. 1037, 1039 (E.D. Cal. 1995) (quoting
Advisory Committee Notes to 1966 Amendment to Fed. R. Civ. P. 42(b)).
12 Docket 1 at 10.
13 See generally Docket 21.
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Country Mut. Ins. Co. v. Kambic 	Case No. 3:21-cv-00042-JMK
Order Granting Motion to Bifurcate 	Page 5
and economy by disposing of Mr. Kambic’s counterclaims before the parties engaged in
costly discovery and other pretrial work.14
Mr. Kambic appears to agree with this.15 	He opposes Country Mutual’s
motion, however, because he believes that coverage exists; as such, bifurcation would
subject the parties to two trials.16 This certainly is a possibility, and bifurcation is not an
indication that the Court believes Mr. Kambic’s claims to be meritless. 	However, the
possibility of two trials does not outweigh the potential efficiency gained from bifurcation.
Even if two trials occurred, the counterclaims are sufficiently distinct that the parties would
not be subject to relitigating issues or duplicating discovery. Indeed, Country Mutual states
that it anticipates deposing only Mr. Kambic before moving for summary judgment on the
issue of coverage. 	The breach and bad faith counterclaims may require an additional
deposition of Mr. Kambic, but would otherwise entail entirely different witnesses, experts,
and discovery. Further, the second trial regarding Mr. Kambic’s counterclaims would be
streamlined because the Court already would have determined that he was entitled to
coverage under the policy.17
14 See Ferguson v. State Farm Mut. Auto. Ins. Co., No. 3:11-cv-00081-JWS, 2011 WL
4946349, at *1 (D. Alaska Oct. 18, 2011) (“In insurance cases, courts frequently bifurcate bad
faith claims when they would be precluded by resolution of a breach-of-contract claim in the
insurance company’s favor.”).
15 See Docket 28 at 6.
16 Id. at 6–7.
17 See Stevenson v. Holland, 504 F. Supp. 3d 1107, 1129 (E.D. Cal. 2020) (finding
bifurcation appropriate where, even if the claims proceed to trial, the issues would be narrowed
and the parties required to present less evidence).
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Country Mut. Ins. Co. v. Kambic 	Case No. 3:21-cv-00042-JMK
Order Granting Motion to Bifurcate 	Page 6
Mr. Kambic asserts that the issues are intimately “intertwined” and would
require the same witnesses.18 However, the Court cannot imagine—and Mr. Kambic does
not specify—how bad faith experts and claims adjusters would be relevant to the issue of
whether coverage exists under the policy contract. 	The issue of coverage certainly is
related to Mr. Kambic’s breach of contract claim, but as mentioned, determining that
Mr. Kambic’s policy covered the December 2020 water damage would serve only to
streamline litigation of that claim.19
Last, Mr. Kambic argues that conducting two trials will be emotionally
taxing. 	But, again, holding two sequential trials will not be significantly longer than
holding a single trial on all claims and counterclaims. 	Bifurcation will not duplicate
discovery or witnesses; it simply is a question whether to litigate the counterclaims now or
to defer considering them until coverage is established. 	The Court will not subject the
parties to costly and potentially unnecessary discovery when it could first resolve a simple
and dispositive preliminary issue.
In sum, bifurcation would expedite and economize this case because the
Court may “avoid a difficult question by first dealing with [the] easier, dispositive issue”
of whether coverage exists.20 The possibility of conducting two trials does not outweigh
the potential benefits of bifurcation; the trials would be largely distinct and would not
involve the same evidence or issues. 	Mr. Kambic asks the Court order concurrent
18 Docket 28 at 5–7.
19 Additionally, if the Court finds that Mr. Kambic’s policy provides coverage, bifurcation
may facilitate settlement.
20 Danjaq LLC v. Sony Corp., 263 F.3d 942, 961 (9th Cir. 2001).
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Country Mut. Ins. Co. v. Kambic 	Case No. 3:21-cv-00042-JMK
Order Granting Motion to Bifurcate 	Page 7
discovery if the claims are bifurcated, but, as discussed above, much of the convenience
served by bifurcation is deferring costly and potentially unnecessary discovery. Thus, the
Court will exercise its discretion to bifurcate the case under Rule 42(b), including related
discovery, and first resolve the issue of coverage presented by Country Mutual’s complaint
for declaratory judgment.
IV. 	CONCLUSION
For the reasons stated above, County Mutual’s Motion to Bifurcate and Stay
is GRANTED. 	Mr. Kambic’s counterclaims are STAYED pending the resolution of
County Mutual’s claims for declaratory judgment, namely, (1) whether Mr. Kambic’s
policy is void ab initio and (2) whether coverage exists under that policy for the December
2020 water damage.
IT IS SO ORDERED this 29th day of April, 2022, at Anchorage, Alaska.
/s/ Joshua M. Kindred
JOSHUA M. KINDRED
United States District Judge
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